European Affairs

The leader of the United Kingdom affirmed in a much-heralded speech that her country will leave the European Union to regain control over immigration and other national laws, but equally stressed the critical need for a strong Europe and a trade arrangement that would minimize any economic fallout from Brexit as Europe’s recovery remains unsteady.

In stark terms, Prime Minister Theresa May called for a “clean break” from EU membership but put on the table a “bold and ambitious” trade deal with Brussels before Britain leaves the EU in 2019, a "comprehensive free trade agreement" giving Britain "the greatest possible access" to the single market. Without such a deal, “no deal would be better than a bad deal,” she warned.

She said she wanted the U.K. "to have a customs union agreement with the EU…. Whether that means we must reach a completely new customs agreement, become an associate member of the customs union in some way, or remain a signatory to some elements of it, I hold no preconceived position."

Beyond trade, May shed light on her government’s negotiating position in five key areas:

Control Britain’s borders: "The message,” she said, “from the public before and during the referendum campaign was clear: Brexit must mean control of the number of people who come to Britain from Europe. And that is what we will deliver." She appealed to Brexit supporters’ concerns about record levels of migration, acknowledging that record levels of migrants had “put pressure on public service” and the jobs market.

She offered no further details, but press reports suggest that a range of options is under consideration, including a work permit system for foreign workers that allows entry for those in sectors key to the country’s competitiveness.

Post-election analysis shows that the 52-percent share of voters supporting “Leave” resulted from a coalition of middle-class affluent Eurosceptics, the older working class, and those poorer, anti-immigrant voters, especially after the EU’s expansion east in 2004 and 2007, according to Kirby Swales, author of the Understanding the Leave Vote.

May is acutely aware of the political calculus in equating the “Leave” vote to a sense of disenfranchisement and powerlessness some voters feel as they see the disparities between the rich and moderate-income workers widen. “It was about a sense - deep, profound and let's face it often justified - that many people have today that the world works well for a privileged few, but not for them," she told her party faithful.

Let Parliament vote: Parliament will vote on the final Brexit arrangement: “I can confirm today that the government will put the final deal that is agreed between the UK and the EU to a vote in both Houses of Parliament, before it comes into force.” Yet, Brexit Secretary David Davis told members of Parliament that the U.K. would be leaving the EU whatever the outcome of Parliament’s vote.

End jurisdiction of European Court of Justice rulings over the U.K.: “Laws will be interpreted by judges not in Luxembourg but in courts across this country.” In earlier speeches, May has stressed this point. "We are not leaving only to return to the jurisdiction of the European Court of Justice," she said to her party’s conference. "That's not going to happen."

Phase-in Brexit with a firm, “clean break:” There could be a “phased process of implementation,” but there could not be "unlimited transitional status," which would leave the UK in "some kind of permanent political purgatory.”

Contribute to EU budget: While affirming that the U.K. could make an "appropriate contribution" as part of the deal, she stressed that “the principle is clear: the days of Britain making vast contributions to the European Union every year will end." The Leave campaign had hammered hard on the costs of EU membership and how those funds could be used to improve social services.

The U.K. will alert Brussels under Article 50 of the Lisbon Treaty before the end of March that the country is ending membership. Doing so is complicated by a pending UK Supreme Court decision and political upheaval in Northern Ireland. The court is expected to rule next Tuesday (January 24; 9:30 a.m. London time) on whether Article 50 can be invoked using executive powers. The government is appealing an earlier ruling that May must seek Parliament’s approval before the divorce negotiations can begin.

Immediately after May’s speech, the pound, after being driven down by investors’ speculation over the speech’s proposals, rebounding to $1.23, the highest one-day bounce since October 2008. And, the International Monetary Fund revised its growth outlook for the U.K, economy upward by 0.4 percentage points, to an annual expansion of 1.5 percent, compared to its October forecast. Britain’s economy "held up better than expected in the aftermath of the Brexit vote,” the IMF said, yet cautioned that much uncertainty about Brexit may lead to adverse consequences.

Europe’s leaders questioned May’s plans, especially the policy conundrum May’s proposal did not amply address, that access to free trade is inseparable from adherence to other key components, particularly the free movement of EU nations across all borders of the 28 members. Guy Verhofstadt, the European parliament’s Brexit negotiator, was among the most vocal. In his article for the Guardian, a British newspaper, he wrote: “It is an illusion to suggest that the UK will be permitted to leave the European Union, but then be free to opt back into the best parts of the European project, for example by asking for zero tariffs from the single market, without accepting the obligations that come with it. I hope that British people will see from the perspective of an EU taxpayer, how unreasonable this would be.”

Jean-Claude Juncker, the president of the EU commission, equally predicted trying negotiations ahead. These will be “very, very, very difficult,” he said. “We want a fair deal with Britain and a fair deal for Britain, but a fair deal means a fair deal for the European Union.” The remaining EU 27 member states have shown remarkable unity in insisting that adherence to the EU’s four freedoms will be a requisite to the UK’s future access to the single market, clearly mindful that Britain’s deal must be less optimal than full EU membership, lest others may be tempted. “Thinking it can be otherwise would indicate a detachment from reality,” said Maltese Prime Minister, Joseph Muscat, whose nation currently holds the Presidency of the Council of the European Union.